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I sold a rental property at a loss (no capital gains);

I sold a rental...

I sold a rental property at a loss (no capital gains); however should I pay the $133,000 on the principal of my house I owe 166,000 at 2.8% or buy another rental?

Accountant's Assistant: The Expert will know how to help. Please tell me more, so we can help you best.

I sold a rental property at a loss (no capital gains); however should I pay the $133,000 on the principal of my house I owe 166,000 at 2.8% or buy another rental?

Accountant's Assistant: Is there anything else the Expert should be aware of?

The 133,000 is for two adjacent parcels

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Answered in 2 hours by:
10/17/2017
Barbara
Barbara, Enrolled Agent
Category: Tax
Satisfied Customers: 6,160
Experience: 20+ years of experience in tax preparation; 30+ years of experience as a real estate/corporate paralegal.
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Welcome to Just Answer. My name is ***** ***** I will be happy to assist you.

It is really your decision as to whether you want to use the profit from the rental sale to pay down the principal or invest in another rental.

If you are not in any financial difficulty and do not foresee any problems with continuing to pay your house mortgage, buying another rental to produce income would be the way to go.

Please let me know if I can assist you further.

Thank you and best regards,

Barb

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Customer reply replied 8 months ago

I sold a rental property at a loss (no capital gains); however should I pay the $133,000 on the principal of my house I owe 166,000 at 2.8% or buy another rental?

Accountant's Assistant: The Expert will know how to help. Please tell me more, so we can help you best.

I sold a rental property at a loss (nocapital gains); however should I pay the $133,000 on the principal of my house I owe 166,000 at 2.8% or buy another rental?

Accountant's Assistant: Is there anything else the Expert should be aware of?

The 133,000 is for two adjacent parcels . I am 70 years old had cancer twice and not retired because I still owe 166,000 dollars on my residence. My youngest daughter cannot afford a house and I hate to see her throw money down the drain. If I buy a small house I would rent it to her and make a life estate deed and then to her. I also have one other property rental plus two cottages to pay only taxes, insurance and expenses for (no mortgage). I want to do what is best for my income taxes. I have medicare and medical insurance and draw veteran income from my husband now deceased and one pension $712 dollars/mo. I will have to take RMD's in 2018 of about $15,000/yr. Help...need professional assistance. thank you

Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 32,978
Experience: Taxes, Immigration, Labor Relations
Verified

Because you realized a loss - you woudl not worry about additional tax liability on that sale.

Moreover - that loss will offset your other taxable income.

Now you have 133,000 in cash and asking about best way to use funds.

If you choose to pay off your mortgage - that will save you 2.8% on interest charges.

Another alternative is to purchase another rental property and have steady income. So to compare these options we need to know what rental income you may expect after all expenses?
If for instance you can expect at least 5% annual net rental income 133,000 * 5% = $6650 - and you may expect the property appreciated in future - it would be better to have another rental property.

However - if expected net rental income is below that - you might be better just to payoff your mortgage.

Let me know if you need any help.

Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 32,978
Experience: Taxes, Immigration, Labor Relations
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Lev and 87 other Tax Specialists are ready to help you
Ask your own question now
Customer reply replied 8 months ago
I have a related question for Lev...I sold 2 adjacent parcels for one price and I do not know how to divide the price for each parcel separately and I bought them at different times...how do I do this for tax purposes...the cottage was listed as a rental on my taxes
Customer reply replied 8 months ago
21 October 2017 07:48
I have a related question for Lev...I sold 2 adjacent parcels for one price and I do not know how to divide the price for each parcel separately and I bought them at different times...how do I do this for tax purposes...the cottage was listed as a rental on my taxes
Customer reply replied 8 months ago

17 October 2017 01:22
Barbara Barbara
Tax Professional
Welcome to Just Answer. My name is ***** ***** I will be happy to assist you.It is really your decision as to whether you want to use the profit from the rental sale to pay down the principal or invest in another rental.If you are not in any financial difficulty and do not foresee any problems with continuing to pay your house mortgage, buying another rental to produce income would be the way to go.Please let me know if I can assist you further.Thank you and best regards,BarbMy goal is to provide you with excellent service. If you are satisfied, please rate me. If you have follow-up questions on this same topic, use the reply box below. To start a new conversation with me on a new topic, request me again.
17 October 2017 01:46
I sold a rental property at a loss (no capital gains); however should I pay the $133,000 on the principal of my house I owe 166,000 at 2.8% or buy another rental?

Accountant's Assistant: The Expert will know how to help. Please tell me more, so we can help you best.

I sold a rental property at a loss (nocapital gains); however should I pay the $133,000 on the principal of my house I owe 166,000 at 2.8% or buy another rental?

Accountant's Assistant: Is there anything else the Expert should be aware of?

The 133,000 is for two adjacent parcels . I am 70 years old had cancer twice and not retired because I still owe 166,000 dollars on my residence. My youngest daughter cannot afford a house and I hate to see her throw money down the drain. If I buy a small house I would rent it to her and make a life estate deed and then to her. I also have one other property rental plus two cottages to pay only taxes, insurance and expenses for (no mortgage). I want to do what is best for my income taxes. I have medicare and medical insurance and draw veteran income from my husband now deceased and one pension $712 dollars/mo. I will have to take RMD's in 2018 of about $15,000/yr. Help...need professional assistance. thank you
17 October 2017 06:43
Lev Lev
Tax Professional
Because you realized a loss - you woudl not worry about additional tax liability on that sale.Moreover - that loss will offset your other taxable income.Now you have 133,000 in cash and asking about best way to use funds.If you choose to pay off your mortgage - that will save you 2.8% on interest charges.Another alternative is to purchase another rental property and have steady income. So to compare these options we need to know what rental income you may expect after all expenses?
If for instance you can expect at least 5% annual net rental income 133,000 * 5% = $6650 - and you may expect the property appreciated in future - it would be better to have another rental property.However - if expected net rental income is below that - you might be better just to payoff your mortgage.Let me know if you need any help.My goal is to provide you with excellent service. If you are satisfied, please rate me. If you have follow-up questions on this same topic, use the reply box below. To start a new conversation with me on a new topic, request me again.
21 October 2017 07:48
I have a related question for Lev...I sold 2 adjacent parcels for one price and I do not know how to divide the price for each parcel separately and I bought them at different times...how do I do this for tax purposes...the cottage was listed as a rental on my taxes
21 October 2017 07:50
21 October 2017 07:48
I have a related question for Lev...I sold 2 adjacent parcels for one price and I do not know how to divide the price for each parcel separately and I bought them at different times...how do I do this for tax purposes...the cottage was listed as a rental on my taxes

Sorry for delay...

The issue is that you (probably unintentionally) blocked me from posting - and it took some time for the customer service to change that...

In such situation - you may prorate the total sale price between two adjacent parcels according to their values for real estate tax purposes.

For instance - if one parcel is values as $30k and another as $35k for real estate tax purposes - you will determine teh percentage as

$30k / ($30k + $35k) = 46.15% for the first parcel

and 53.85% for the second parcel

Let me know if you need any help.

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